Success Secrets | When a raw deal isn’t one

What is wrong with the Yankees? How could they stick a manager as great as Joe Torre with such a raw deal?

—Stephen Macmillan, Boston

Since we are going to take issue with your perspective in a few paragraphs, allow us to beginthis column with our points of agreement. First, we wholeheartedly agree with your view of the New York Yankees, the iconic American baseball team loved and hated in equal measure. During his 12 years as the team’s manager, Torre helped the Yankees win the World Series four times. But the team hasn’t won a Championship since 2000, which prompted George Steinbrenner, the team’s owner, to reconsider keeping on Torre when his contract came up for renewal this year. In the end, Torre opted to resign.

Jack and Suzy Welch

The team ownership deserves the Horse’s Rear End of the Year award for its handling of Torre’s contract. Take, for instance, Steinbrenner’s ugly and inhumane “Win or You’re Outta Here” pronouncement in the local paper before the team’s play-off series against the Cleveland Indians. Awful! Second, we thoroughly agree that Torre is a star. Who else can claim four World Series rings and 12 straight post-season appearances? He also happens to be a high-integrity, good-hearted, first-class human being, deserving of all the admiration he receives.

But did the Yankees stick Torre with a raw deal? No way.

“Very reasonable” is more like it. The offer accurately reflected the dynamics of the competitive marketplace. With a $5 million (approx. Rs20 crore) base salary, Torre would still be the highest-paid manager in baseball. And with a $1 million bonus for every play-off series won, it reflected the ownership’s priorities. Ultimately, if the Yankees won the World Series in 2008, Torre stood to receive an $8 million payday, more than any other manager by a factor of two. Sure, you can debate whether the Yankees use the right performance metrics, given the role luck seems to play in a short play-off series. But in the cool light of day, you really cannot call the Torre deal any of the epithets it has inspired lately, from your “raw” to “insulting” to “cruel”.

But therein lies the problem. Torre’s deal was not negotiated in the cool light of day. It was negotiated under the hot glare of media scrutiny. Because of that factor, it fell victim to an all-too-common dynamic in any industry, not just sports, be it baseball, cricket or football (what Americans call soccer).

When negotiations become public, rationality exits and emotionality sweeps in. Deals get transformed from what they should be—best all-around solutions—to Gladiator-like death matches. In the end, one side gets to proclaim victory and the other gets cast as the smote, humiliated loser. Examples of this destructive phenomenon abound in business. It is particularly prevalent in labour negotiations, as they are almost always played out in the press. New York’s contract dispute with its 34,000 transit workers in 2005, for example, was a Passion-play production of a negotiation, if there ever was one. Mayor Michael Bloomberg publicly renounced the union as “thuggish” and the union leadership defied court orders. Finally, as always, the adversaries sat down at a table and hammered out a settlement. It is important to note, however, that that event only occurred after both sides had signed an agreement not to talk to the media. But it’s not just broad-based union agreements that get stung by the irrationality effect of media scrutiny. Any time an acquisition fight finds its way into the public eye, competing buyers can get a little wacky. Suddenly, it’s not just about buying a company at a reasonable price. It’s about who will be declared the winner and the loser. The result: overpayment, sometimes to a ridiculous degree.

Similarly, media coverage can really muck up contracts for big-ticket items. Airlines, for instance, are masters of pitting companies against each other when they are in the market for a new plane purchase. The “winner” of the order may get to celebrate its big business headlines, but invariably, it then has to spend the next several years clawing back the lost margin with service and parts sales.

The point is this: Some of the least sensible, most unfortunate deals we know of have been made because the people involved felt they had to save face before a watching world.

We would put Torre smack in the middle of that category. Again, we respect him immensely, but it seems he let all the public attention sway his rational thinking, replacing it with gut-level feelings of pride and defiance. It is hard to blame him. He is only human.

From where we sit, the Yankees ownership started the media mess, with their appalling public threats and taunting. Sadly, though, the Torre saga is over. The Yankees have lost a great manager, and that manager has lost a great job. But the lesson of those events should not be lost on anyone in business. When it comes to negotiations, conduct them quietly, quickly and in private—even if that approach appears to cost you more. In the end, it is worth it.

Jack and Suzy are eager to hear about your career dilemmas and challenges at work, and look forward to answering some of your questions in future columns. Jack and Suzy Welch are the authors of the international best-seller, Winning. Campaign readers can email them questions at winning@livemint.com. Please include your name, occupation and city.